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> Inflation is one of the most politically salient factors of this decade > Inflation has lots of causes, it's true. https://fred.stlouisfed.org/series/M2SL h

> Inflation is one of the most politically salient factors of this decade > Inflation has lots of causes, it's true. https://fred.stlouisfed.org/series/M2SL https://fred.stlouisfed.org/series/M2SL Algorithmic price fixing is certainly a not-insignificant part of the issue. But it's strange to see zero acknowledgement of the massive increase in money supply over the same time period. When doing causal analysis, we need to examine both the private sector and our government. When you use M2 as denominator for egg prices, we're at the same place we were in early 2016: https://fred.stlouisfed.org/graph/?g=1DcVw https://fred.stlouisfed.org/graph/?g=1DcVw

cluckindan 2y ago
Increase in money supply only causes inflation if the money is spent on purchases of items with inflated prices (say, ferraris instead of basic food items). When the basic food items become ferraris, people have no choice on that.
- Aurornis 2y ago
  > Increase in money supply only causes inflation if the money is spent on purchases of items with inflated prices The economy doesn’t work like that. You can’t inject money but only have it apply to specific sectors. Everything is interconnected in the economy. If a lot of money comes into the market it will cause a lot of activity, changes in demand, new job openings that entice employees upward, increased wage demands for jobs, new hires requiring higher wages, rising costs to cover those wages, and the cycle goes on and on. You can’t isolate the effects of inflation. At the scale of economies, inflation effects ripple through everything. Also, eggs are a terrible indicator. Did everyone forget about the bird flu? It’s a supply problem.
  - cluckindan 2y ago
    Increased wages do not cause inflation. There are plenty of studies that show this.
lesuorac 2y ago
> But it's strange to see zero acknowledgement of the massive increase in money supply over the same time period. Because when you look at inflation in the period of say ~2000 to ~2025 [1] it's really not very obvious that there's an increase in M2 from '08 onward. Talking about M2 as a source of inflation is like shouting Red at a roulette wheel. Sure, sometimes the ball will land on Red but your shouting is a non-sequitur on the result. [1]: https://fred.stlouisfed.org/series/CPALTT01USM657N https://fred.stlouisfed.org/series/CPALTT01USM657N
- VirusNewbie 2y ago
  Because true inflation isn’t CPI!
- greyface- 2y ago
  The CPI time series you provided is monthly % change. Here's M2 in those same units: https://fred.stlouisfed.org/graph/?g=1DcYJ https://fred.stlouisfed.org/graph/?g=1DcYJ They look pretty similar to me. Chaotic in the short term, but averaging positive between 0-1%. In other words, slow but consistent exponential growth. I didn't say anything about a discontinuity in '08, I'm not sure what point you're trying to make with that. Edit: here they are both plotted side by side in those units: https://fred.stlouisfed.org/graph/?g=1DcZr https://fred.stlouisfed.org/graph/?g=1DcZr
  - kurthr 2y ago
    Maybe you can see something in that noise, but I just plotted those and looked at their correlations, and it's garbage. Even looking at their sums, they have different slopes (over decades), all you can say is "number go up". The monthly correlation is junk, the yearly correlation of their sums is junk, the decade long optimally lagged correlation is junk (include 2008-2010 and it's worse). I had to look, because I wondered if there was some interesting coincidence, but there's not. Now, if what you're trying to say is that the much larger (non M2) eurodollar currency correlates to long term global growth and inflation, yeah that's true. There is a trillion $ industry maintaining that called the banking system. But the idea that eggs, oil, lumber, or rent are well correlated is not even a funny joke. Gold and bitcoin are a bit different because they are so financialized, but I wouldn't go day trading them just based on Fed stats either.
miltonlost 2y ago
ok, but does the increase in money supply explain the price collusion that businesses admit to doing? You're bringing up an issue that's not pertinent to companies criming.
- greyface- 2y ago
  I'm addressing the part of the article that uses inflation as a framing device. If inflation is the motivating issue, then we are turning a blind eye to the elephant in the room. I don't disagree with the criticisms of price collusion criming.
- JumpCrisscross 2y ago
  > does the increase in money supply explain the price collusion that businesses admit to doing Why would one cause of a phenomenon explain another cause? The hypothesis "both wood and plastic burn" doesn't require wood to explain to existence of plastic.
fransje26 2y ago
> https://fred.stlouisfed.org/series/M2SL https://fred.stlouisfed.org/series/M2SL This graph is absolutely insane. As I am completely unfamiliar with what is represented, would you have some pointers on where to start to understand what it represents? I'm particularly intrigued by the very sharp rise during the covid time, when the global economy was in taters.
- daedrdev 2y ago
  It's not as insane as it looks. They changed the definition of M2 in 2020, which means we expect to see a jump right then
  - deleted 2y ago
    [deleted]
  - fransje26 2y ago
    Ah, thank you for the clarification.
  - myroon5 2y ago
    The definition of M1 expanded in ~April 2020: https://fredblog.stlouisfed.org/2021/05/savings-are-now-more-liquid-and-part-of-m1-money/ https://fredblog.stlouisfed.org/2021/05/savings-are-now-more...
    - greyface- 2y ago
      And to the extent that the definition of M2 changed in 2020 (the FRED series description indicates it did), this was only in response to the expansion of M1, to ensure that it was not double-counted in or removed from M2.
- greyface- 2y ago
  https://en.wikipedia.org/wiki/Money_supply https://en.wikipedia.org/wiki/Money_supply
- cudgy 2y ago
dd36 2y ago
For money supply to be inflationary it has to increase demand or reduce supply for a given product. It sounds neat but there’s little evidence of that occurring on more than a temporary basis during covid. But covid also caused supply shocks. It seems that what happened is covid showed companies what they could get away with both because of decades of consolidation and because of new ways of colluding.
- greyface- 2y ago
  More dollars in circulation chasing the same supply of products = increased demand for those products, in dollar terms. I'm not looking specifically at the COVID spike (which, indeed, seems to be over from a monetary policy perspective), I'm looking at the longer term continuous exponential increase in money supply.
  - dd36 2y ago
    But those extra dollars aren’t with consumers. Otherwise, yes. That’s where the money supply causes inflation argument falls apart — at least for this case.
    - greyface- 2y ago
      Maybe not at T=0, depending on how you look at money creation. But the "extra" dollars, wherever they originate, will eventually be spent, and will eventually diffuse out to every part of the economy. We're not printing trillions of dollars, locking them in a treasure chest, and burying them deep underground so that they may never move.

cluckindan 2y ago

Increase in money supply only causes inflation if the money is spent on purchases of items with inflated prices (say, ferraris instead of basic food items). When the basic food items become ferraris, people have no choice on that.

Aurornis 2y ago
> Increase in money supply only causes inflation if the money is spent on purchases of items with inflated prices The economy doesn’t work like that. You can’t inject money but only have it apply to specific sectors. Everything is interconnected in the economy. If a lot of money comes into the market it will cause a lot of activity, changes in demand, new job openings that entice employees upward, increased wage demands for jobs, new hires requiring higher wages, rising costs to cover those wages, and the cycle goes on and on. You can’t isolate the effects of inflation. At the scale of economies, inflation effects ripple through everything. Also, eggs are a terrible indicator. Did everyone forget about the bird flu? It’s a supply problem.
- cluckindan 2y ago
  Increased wages do not cause inflation. There are plenty of studies that show this.

lesuorac 2y ago

> But it's strange to see zero acknowledgement of the massive increase in money supply over the same time period. Because when you look at inflation in the period of say ~2000 to ~2025 [1] it's really not very obvious that there's an increase in M2 from '08 onward. Talking about M2 as a source of inflation is like shouting Red at a roulette wheel. Sure, sometimes the ball will land on Red but your shouting is a non-sequitur on the result. [1]: https://fred.stlouisfed.org/series/CPALTT01USM657N https://fred.stlouisfed.org/series/CPALTT01USM657N

VirusNewbie 2y ago
Because true inflation isn’t CPI!
greyface- 2y ago
The CPI time series you provided is monthly % change. Here's M2 in those same units: https://fred.stlouisfed.org/graph/?g=1DcYJ https://fred.stlouisfed.org/graph/?g=1DcYJ They look pretty similar to me. Chaotic in the short term, but averaging positive between 0-1%. In other words, slow but consistent exponential growth. I didn't say anything about a discontinuity in '08, I'm not sure what point you're trying to make with that. Edit: here they are both plotted side by side in those units: https://fred.stlouisfed.org/graph/?g=1DcZr https://fred.stlouisfed.org/graph/?g=1DcZr
- kurthr 2y ago
  Maybe you can see something in that noise, but I just plotted those and looked at their correlations, and it's garbage. Even looking at their sums, they have different slopes (over decades), all you can say is "number go up". The monthly correlation is junk, the yearly correlation of their sums is junk, the decade long optimally lagged correlation is junk (include 2008-2010 and it's worse). I had to look, because I wondered if there was some interesting coincidence, but there's not. Now, if what you're trying to say is that the much larger (non M2) eurodollar currency correlates to long term global growth and inflation, yeah that's true. There is a trillion $ industry maintaining that called the banking system. But the idea that eggs, oil, lumber, or rent are well correlated is not even a funny joke. Gold and bitcoin are a bit different because they are so financialized, but I wouldn't go day trading them just based on Fed stats either.

miltonlost 2y ago

ok, but does the increase in money supply explain the price collusion that businesses admit to doing? You're bringing up an issue that's not pertinent to companies criming.

greyface- 2y ago
I'm addressing the part of the article that uses inflation as a framing device. If inflation is the motivating issue, then we are turning a blind eye to the elephant in the room. I don't disagree with the criticisms of price collusion criming.
JumpCrisscross 2y ago
> does the increase in money supply explain the price collusion that businesses admit to doing Why would one cause of a phenomenon explain another cause? The hypothesis "both wood and plastic burn" doesn't require wood to explain to existence of plastic.

fransje26 2y ago

> https://fred.stlouisfed.org/series/M2SL https://fred.stlouisfed.org/series/M2SL This graph is absolutely insane. As I am completely unfamiliar with what is represented, would you have some pointers on where to start to understand what it represents? I'm particularly intrigued by the very sharp rise during the covid time, when the global economy was in taters.

daedrdev 2y ago
It's not as insane as it looks. They changed the definition of M2 in 2020, which means we expect to see a jump right then
- deleted 2y ago
  [deleted]
- fransje26 2y ago
  Ah, thank you for the clarification.
- myroon5 2y ago
  The definition of M1 expanded in ~April 2020: https://fredblog.stlouisfed.org/2021/05/savings-are-now-more-liquid-and-part-of-m1-money/ https://fredblog.stlouisfed.org/2021/05/savings-are-now-more...
  - greyface- 2y ago
    And to the extent that the definition of M2 changed in 2020 (the FRED series description indicates it did), this was only in response to the expansion of M1, to ensure that it was not double-counted in or removed from M2.
greyface- 2y ago
https://en.wikipedia.org/wiki/Money_supply https://en.wikipedia.org/wiki/Money_supply
cudgy 2y ago

dd36 2y ago

For money supply to be inflationary it has to increase demand or reduce supply for a given product. It sounds neat but there’s little evidence of that occurring on more than a temporary basis during covid. But covid also caused supply shocks. It seems that what happened is covid showed companies what they could get away with both because of decades of consolidation and because of new ways of colluding.

greyface- 2y ago
More dollars in circulation chasing the same supply of products = increased demand for those products, in dollar terms. I'm not looking specifically at the COVID spike (which, indeed, seems to be over from a monetary policy perspective), I'm looking at the longer term continuous exponential increase in money supply.
- dd36 2y ago
  But those extra dollars aren’t with consumers. Otherwise, yes. That’s where the money supply causes inflation argument falls apart — at least for this case.
  - greyface- 2y ago
    Maybe not at T=0, depending on how you look at money creation. But the "extra" dollars, wherever they originate, will eventually be spent, and will eventually diffuse out to every part of the economy. We're not printing trillions of dollars, locking them in a treasure chest, and burying them deep underground so that they may never move.